Plaid’s new independence report
Plaid Cymru have today launched what they are reporting as ‘proof’ that Wales would not flounder under independence, but would soar.
My sympathies for an independent Wales are a bit unclear, as within the EU it seems to be that the only ‘benefits’ of sovereign statehood against autonomy within a federal UK would be the need to pay for an army, borders, Embassies and other boring security.
What seems telling to me about this report is that it doesn’t specifically address the argument that Wales would be worse off under independence, but expressing the argument in terms of small countries. Conversely, while anti-independence spokespeople do try to point to the woes of Iceland and Ireland to argue against it for Wales, they usually express it in terms that Wales, with its peculiar context would do worse.
There are a number of considerations in assessing how differently Wales would fare under independence. My observation is that the creation of the institution in 1999 with the continuous Labour government initially developed a paternalist culture with Labour in London at the reigns, with the Assembly free simply to ignore the excesses of New Labour such as PFI and marketisation of services in general. This has meant that for much of its formative years the Assembly hasn’t had to do much apart from spend the ever increasing budget it was receiving until 2010. This has obviously led to a lack of ambition and ideas, knowing that the policy development of Westminster will do the bulk of the work.
This is of course not true no with the Tories in power and the rhetoric of Carywn Jones has certainly shifted, going to great lengths to present Labour as being more Welsh than in the past.
This paternalist culture, along with the fact that the Assembly is still very restricted in what it can do, seems to suggest a Wales doing worse than it could have done under independence, where these phenomena simply wouldn’t have emerged.
But the assertion that the economy would be 39% bigger is among the worst of lazy generalisations, lacking contextual analysis.
The countries being compared to Wales include Ireland, Iceland, Finland, Norway and Denmark, all very affluent societies (up until recently at least), but all of which gained independence by the end of the Second World War. They have had time to build up their infrastructure and economic culture before the onset of globalisation. In the case of Ireland, it was saved by vast sums of EU convergence funds that are no longer nearly as generous. Since the Convergence programme is now matched-funded by the member state, there is a chance we would be worse off for development funding!
Has Wales been compared to countries that recently gained independence? If you were to compare Wales to the former Soviet nations, you would probably find that they have been growing a lot faster, but from a much lower base, to the extent that much growth has been a result of inward investment on the basis of low wages (supported by low tax), something that was never viable for Wales, and thankfully seems to have finally ditched.
I have no issue with the academic assumptions in the report, that small is bountiful and the manageability of a smaller state working in the interests of a whole nation rather than being treated as a periphery, would mean Wales would be more prosperous had it became independent, but the modelling to reach the 2.2% annual growth seems symptomatic of the simplistic assumptions in the economics profession.
Sam,
There is much in your analysis with which I agree but as the co-author of the report I hope you don’t mind if I take issue with you calling it lazy or simplistic. Most of the 70 pages focus on the question of small country economics: nowhere does it claim to be an in-depth analysis of the Welsh economy, past, present or future. Its specific focus is on the relationship between country size and economic performance (measured in terms of the rate of increase in income per capita).
You don’t take issue with our main finding – which has some important consequences for countries like Wales and Scotland – that “small is bountiful”. This conclusion should come as no surprise to a green audience, though we can be fairly criticised for our choice of the narrowly economic measure of GDP per capita, a point we accept in the body of the report. We find that over the last thirty years about half the differences in growth rates between western European countries can be explained by differences in population, a very significant finding, and offer some possible explanations as to what lies behind this general tendency.
As a post-script we do ask what how Wales might have fared if its economic growth rate had followed the pattern of similar-sized and similar-income countries over the period in question. We point out that a whole host of other factors – the policies followed, the strength of its institutions and, as you are right to add, geography and history – mean that an independent Wales might do better or worse. This is not a prediction, but it is an attempt to work out what effect size and poverty (poorer countries tend to grow faster as you point out due to the convergence effect) might have had based on what we know from their effects elsewhere. Building models and asking counter-factuals are an important part of economics’ imaginative armoury – what Keynes (the Elder) called the art of political economy. We should never confuse the model with reality, and the ahistoric and de-contextualised nature of neoclassical economics actually hinders rather than helps our understanding of the world as it is. But asking what ifs is an important counter-point to a more insidious intellectual laziness that accepts Wales (and the world) as it is, than what might, and may yet, be.
I think that a report that looks at the underlying sources of Wales’ relative poverty – which some would trace to the collapse of the coal price (Peak Coal, anybody?) in 1923 – is long overdue. Perhaps we could collaborate – this report was after all published not by Plaid Cymru but by Jill Evans MEP, a prominent member of the EFA/Green European Parliamentary Group.